Nigeria elections: Status quo vs a pro-market push

Greater differences between candidates than we first anticipated. Nigeria’s general election is scheduled for 16 February and there is no clear favourite. Given that the challenger (Atiku Abubakar) and his key backers were the key backers of the incumbent (Muhammadu Buhari) in 2015, we believed it was unrealistic to expect material deviation in manifesto or ultimate policy implementation. However, greater differentiation in policy promises has emerged than we previously expected. In this report, we compare the different approaches Buhari and Atiku could bring to Nigeria’s challenge to mobilise the capital expenditure needed to drive diversification away from oil, while raising the greater revenues needed for fiscal consolidation.

Status quo (Buhari) versus a pro-market push (Atiku). Although both presidential candidates are likely to face the same structural constraints as their predecessors (vested interests related to zonal interests and patronage networks) in implementing policy, it has become clearer that Buhari (of the APC) represents the status quo (focus on anti-corruption, security and a very conservative economic policy that prioritises FX-reserve rebuilding and inflation control over growth) whereas Atiku (PDP) promises a push to pro-market economics (more flexible FX regime, change of central bank leadership, looser fiscal stance and oil sector reform). As such, an Atiku victory is likely to be more positively received by investors frustrated by Nigeria’s anaemic growth (despite higher oil revenues than expected since mid-2017).

Macro outlook in brief. We expect growth in 2019 to be largely driven by the non-oil sectors, which should be supported by greater consumer demand as consumer confidence further improves, the minimum wage increase is implemented and the potential for lower interest rates and improved credit availability (albeit weak) rises in H2. Inflation rate should pick up, but we see scope for a slowdown in 2020. Minimum wage increases and ongoing disruptions to the agriculture sector due to farmer-herdsmen conflicts are sources of short-term inflationary pressure; possible premium motor spirits (PMS) and electricity tariff rate increases, more likely under an Atiku government, could be longer-term areas of pressure.



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